US embassy cable - 04HARARE1598

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001598 
 
SIPDIS 
 
AF/S FOR BNEULING 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVELLE, D. TEITELBAUM 
USDOC FOR AMANDA HILLIGAS, TREASURY FOR OREN WYCHE-SHAW, 
PASS USTR FOR FLORIZELLE LISER, STATE PASS USAID FOR 
MARJORIE COPSON 
 
E.O. 12958: DECL: 12/31/2009 
TAGS: ECON, ETRD, PGOV, ZI, EINV, Economic Policy 
SUBJECT: AMBASSADOR'S INITIAL CALL ON RBZ GOVERNOR GONO 
 
Classified By: Ambassador Christopher Dell for reason 1.5 d 
 
Summary 
------- 
1. (C) Reserve Bank Governor (RBZ) Governor Gideon Gono told 
Ambassador Dell that he is pursuing closer ties with the 
International Monetary Fund (IMF) by boosting arrears 
payments, trying to facilitate a meeting between President 
Mugabe and IMF Managing Director Rodrigo Rato and arranging 
for an IMF technical visit Nov 17-23.  Gono argued that he 
has begun to revive the economy in nearly ten months on the 
job by attacking inflation and taking other measures. 
Despite criticisms, he indicated he would continue to 
intervene in policies outside traditional central banker 
duties, such as modifying the NGO bill and bringing together 
hostile groups. 
 
Gono Courts the IMF 
------------------- 
 
2. (C) During the Ambassador's initial visit to the Reserve 
Bank, Gono insisted he wanted Zimbabwe to reengage with 
Western countries and international lending institutions. 
Arguing that President Mugabe was "amenable when approached 
in the proper way," Gono claimed to have worked hard to 
successfully convince Mugabe to meet IMF Managing Director 
Rato.  Mugabe was to have met Rato during the Sept 8-9 
African Union Extraordinary Summit in Ouagadougou.  However, 
miscommunication, which he blamed on &bureaucrats8 in the 
President,s office, caused the Ouagadougou meeting to fall 
through.  Gono said he had threatened to resign if a 
Mugabe-Rato meeting did not take place during the opening of 
the 59th United Nations General Assembly in New York.  He 
said the meeting had been agreed for September 20 but he had 
yet to get a readout or even confirmation that it had 
occurred. 
 
3. (C) Gono said he has made tentative arrangements for an 
IMF delegation to visit Harare Nov 17-23.  He said he had 
persuaded acting Finance Minister Herbert Murerwa to move 
forward his 2005 budget presentation to Parliament by one 
week to Nov 18, which will enable the IMF delegation to 
review next year's budget during the visit.  Although Gono 
has now increased Zimbabwe's quarterly arrears payments to 
the IMF to US$5 million, he complained that the IMF's 
decision to close its Harare office had enabled adversaries 
to claim his reengagement efforts were failing. 
 
Steps to Revive Economy 
----------------------- 
 
4. (C) After recounting familiar GOZ policy that brought 
about Zimbabwe's economic collapse - unbudgeted payouts to 
"War Veterans" in 1997, the beginning of intervention in the 
Democratic Republic of the Congo in 1998, etc. - Gono 
summarized his objectives since taking office Dec 1, 2003. 
Above all, the Central Banker said he has sought to reduce 
inflation, which peaked at a monthly 33 percent last November 
and is now below 10 percent.  Gono added that he wanted to 
reassert regulatory authority over the financial sector, 
eliminate remaining price controls, draw business activity 
from the informal to formal sector, make quarterly instead of 
semi-annual monetary policy statements and introduce 
"controlled" foreign exchange currency auctions.  He believes 
he is gradually succeeding at each of these goals and pointed 
out that 2004 gold exports had already surpassed 16 tons, up 
from 12 tons during all of 2003. 
 
Zimbabwe's Central Banker Plus 
------------------------------ 
 
4. (C) Insisting that Zimbabwean politics and economics are 
inextricably linked, Gono said "I make no apology" for 
intervening in GOZ matters unrelated to monetary policy.  In 
that spirit, Gono argued he was trying to tone down the 
restrictive NGO bill.  Gono said he has used his Foreign 
Exchange Auction Advisory Board to promote dialogue among 
such diverse groups as the Commercial Farmers Union, War 
Veterans and National Association of Non-Governmental 
Organizations.  (N.B. The opposition Movement for Democratic 
Change and independent Zimbabwe Congress of Trade Unions have 
refused to participate on the Board.)  Regarding Zimbabwe's 
besieged white farmers, Gono said he wanted to be able to 
tell them "to get on with their work." 
Comment 
5. (C) Gono seeks rapprochement with the West because he 
wants balance-of-payments support to underwrite economic 
restructuring.  IN that regard, his views echoed similar 
remarks we have heard from the local business community which 
believes balance-of-payments support from the International 
Financial Institutions (IFIs) is their only hope for 
recovery.  Neither Gono nor the businessmen were willing to 
acknowledge that questions of improved governance and respect 
for democratic principles were the sine quo non of a revived 
relationship with the IFIs.  For that reason, he has become 
the GOZ's designated reengagement advocate and barbarian 
handler par excellence.  Yet although President Mugabe has 
granted Gono wider latitude than predecessor Leonard Tsumba, 
Gono has been unable to prevail upon Mugabe to lessen 
repressive tactics against the opposition, independent press, 
remaining white farmers and NGOs - or even more pertinent to 
his principal responsibilities, to wean the GOZ off its 
overvalued exchange rate and the harsh administrative 
controls used to maintain it. 
Dell